Amendment No. 161 will make it clear that the discharge of liability provided for by Clause 66 applies only to liabilities in respect of pensions and other benefits.

Amendment No. 162 will make it possible for trustees to complete the wind up of a scheme without necessarily securing the positive consent of every member for the way in which the scheme discharges its liabilities. Many trust bodies seeking to wind up a scheme find it very difficult indeed to track down and consult all members, particularly deferred members. We therefore believe that it is right to give trustees the option of buying annuities for scheme members without having to secure their consent. The trustees' discretion will be restricted. We intend to prescribe in regulations that they should notify all members of the way in which it is proposed that liabilities should be discharged and give them a few months to respond. If a member accepts or chooses an alternative to an annuity, or asks for a different annuity provider to be used, all well and good. But if, having been given sufficient notice, a member fails to respond or cannot be contacted, the effect of Amendment No. 162 will be to enable trustees to buy an appropriate annuity for the member, thus discharging their liability and facilitating the wind up of the scheme.

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Amendment No. 163 removes any possible ambiguity about the amount which the trustees would need to use to discharge their liabilities when winding up a scheme. It makes clear that if they cannot meet the scheme liabilities in full, they must apply the assets of the scheme on the basis set out in Clause 65. I beg to move.

On Question, amendment agreed to.

12.15 a.m.

Lord Lucas moved Amendments Nos. 162 and 163:

Page 39, line 43, leave out ("chosen by the member and").
Page 39, line 46, at end insert:
("( ) If the assets of the scheme are insufficient to satisfy in full the liabilities, as calculated in accordance with the rules of the scheme, in respect of pensions and other benefits (including increases in pensions), the reference in subsection (2) to providing for the discharge of any liability in one or more of the ways mentioned in subsection (3) is to applying any amount available, in accordance with section 65, in one or more of those ways.").

Page 44, line 44, leave out from second ("the") to ("and") in line 46 and insert ("value of the assets of the scheme is less than 90 per cent. of the amount of the liabilities of the scheme").

The noble Lord said: My Lords, this amendment corrects a mathematical inconsistency in the Bill.

Baroness Hollis of Heigham: You made a mistake!

Lord Lucas: My Lords, I accept that it is a mathematical mistake in the Bill. It ensures that the eligibility criteria for compensation in Clause 73 are in line with the provisions for the calculation of compensation in Clause 75. The need for the amendment has been drawn to our attention by the National Association of Pension Funds, the Association of British Insurers and the Association of Pension Lawyers, and I am grateful to all three organisations for their assistance, as indeed I am to the noble Baroness.

Page 46, leave out lines 38 to 42 and insert:
("amount ("the deficit in the assets") by which, immediately before the application date
(i) 90 per cent. of the amount of the liabilities of the scheme,
exceeds
(ii) the value of the assets of the scheme,
so much of that maximum amount as does not exceed the deficit in the assets").

The noble Lord said: My Lords, this amendment sets right another possible mathematical confusion. I beg to move.

On Question, amendment agreed to.

Clause 76 [Payments made in anticipation]:

Baroness Seear moved Amendment No. 170:

Page 47, line 14, leave out ("the payment") and insert ("so much of the payment as they consider appropriate").

The noble Baroness said: My Lords, in moving this amendment, I speak also to Amendment No. 171. The purpose of the two amendments is simply to give the freedom when assessing the repayments to be made to use discretion and not to demand the full amount which could be charged. I beg to move.

Baroness Hollis of Heigham: My Lords, give in!

Lord Mackay of Ardbrecknish: My Lords, I wish I could be as brief as the noble Baroness. However, she raises a serious point even at this late hour of the night, and I shall resist the temptation to give in, as has been pressed upon me by those who seem to want to call it a dayor a morning.

The ability of the board to make payments in anticipation of compensation being payable is an essential feature of the compensation provision. It will ensure that, where a scheme is unable to pay pensions in full, scheme members, particularly pensioners, do not suffer undue financial hardship.

As noble Lords will appreciate, it may take some time to determine where a prescribed offence has occurred, but where the payment of the pensions is threatened the board needs to act quickly. The downside is that the board may later determine that compensation is not after all appropriate. Any payment made by the board is, of course, funded by other schemes paying the levy. We believe that it is right that where compensation is not appropriate, the board should be able to recover any payments made.

I can, however, appreciate the noble Baroness's concern, which she also raised in Committee. She does not want to see the compensation board act in a draconian manner. I can assure the noble Baroness that the Bill as drafted means that the compensation board will have discretion over the recoveries it makes, and this includes the discretion to make partial recoveries. Where a scheme has no assets, recoveries cannot be made, and we would not expect the compensation board to pursue the recovery in such cases. Further, it has

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never been the intention that trustees should be personally liable for payments due to the compensation board.

I gave a commitment in Committee that we would give further consideration to a number of issues surrounding recovery. The issues are wide and varied, covering important areas such as the potential impact on scheme members and the impact on other schemes paying the levy. If any changes are made, they need to strike a balance and ensure that no one has been unduly penalised. We also need to ensure that the board has sufficient flexibility to deal with the situations which may arise.

In these circumstances, we believe that it would be unwise to make hasty changes, particularly if it becomes clear that changes are not, after all, required. I can, however, assure the noble Baroness that we are giving serious and very careful consideration to these issues. If any changes are necessary, we will bring forward an amendment at a later stage in another place. Whatever the outcome, I will certainly write to the noble Baroness once we have completed the work in hand. I suppose that on that basiswhich is quite close to giving in, or at least close enough for this time of nightthe noble Baroness will withdraw her amendment.

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Baroness Seear: My Lords, since the noble Lord has gone as far as he has done, surely it would not be unreasonable to get that degree of flexibility written onto the face of the Bill. We want to encourage trustees, not to discourage them. We want to give the impression that their treatment in cases of this kind will be reasonable and flexible. The Minister has very nearly agreed to it. With just one little push, perhaps he could go the whole way. I ask him to think again and come back at Third Reading with a more generous response to this amendment. Meanwhile, I beg leave to withdraw the amendment.